Singapore Dodges Recession As Economy Expands In Q4

1/1/2013 10:13 PM ET

Singapore's economy expanded at a stronger-than-expected rate in the fourth quarter, escaping recession after a sharp contraction in the previous quarter, advance estimates by the Ministry of Trade and Industry showed Wednesday.

The gross domestic product rose a seasonally-adjusted annualized rate of 1.8 percent in the fourth quarter compared to the previous three-month period, when the GDP was down 6.3 percent.

The growth rate was slightly stronger than the 1.6 percent predicted by economists. In 2012 as a whole, the economy expanded 1.2 percent, at a much weaker pace than the 4.9 percent growth in 2011.

Prime Minister Lee Hsien Loong said Monday that the slowdown mainly reflected the weaknesses in the U.S., European and Japanese economies. It also reflected an increasing shortage of workforce and high operating costs for businesses, he said.

The full-year growth rate was also slightly lower than the ministry's forecast of around 1.5 percent, as the weakness in the manufacturing sector continued to weigh down on the economy.

On a seasonally adjusted annualized rate, manufacturing contracted 10.8 percent quarter-on-quarter, largely reflecting continued weakness in the output of the electronics cluster.

Construction was down 8.9 percent, mainly due to the decline in private sector building activities. However, output of service producing industries rebounded to grow 7 percent as output of wholesale and retail trade, finance and insurance sectors, as well as other services industries recovered.

In the year to the December quarter, the GDP was up 1.1 percent compared to forecasts for a 1.4 percent rise. In the third quarter, the economy recorded zero growth.

In October, the Monetary Authority of Singapore (MAS) retained its tight monetary policy of a modest and gradual appreciation of the Singapore dollar nominal effective exchange rate policy band.

The MAS expects headline inflation to remain elevated in the fourth quarter of 2012 and in the first quarter of 2013, reflecting significant contributions from imputed rentals on owner-occupied accommodation and car prices. Inflation is expected to moderate gradually over the rest of 2013.

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